F.N.B. Corporation (FNB) | Daily Alert August 6
Unlike REITs and telcos, smaller banks are loaded with gunpowder right now. That’s because interest rates appear poised to bottom out, and a return to even a 2% 10-year yield would effectively stuff their pockets with cash—sending prices into orbit and fueling further rounds of super-sized dividend hikes.
We get above the 4% yield mark with FNB Corp. Not to be left out, FNB is on the M&A warpath itself, announcing in mid-July the acquisition of Baltimore-based Howard Bancorp, which will roughly double its Baltimore deposits as a result.
Dividend growth is nonexistent here; the payout hasn’t budged in years, and while analysts are forecasting a recovery from 2020’s difficulties, there’s not enough in that growth to suggest a higher payout is nigh. Still, core loan growth is re-accelerating, so this could be a GARP (growth at a reasonable price) opportunity, with shares trading at 10 times estimates.
Brett Owens, Contrarian Outlook, BNK Invest Inc., 500 North Broadway, Suite 265, Jericho, NY 11753 USA, 516-620-4294, September 30, 2021